Concerns addressed by Caterpillar Inc. and Nvidia Corp to China’s slowing economy and increasing tariff pressure on U.S. profits have resulted dropping prices of U.S. stocks. This erratic reaction of the U.S. stock market was rendered by the ongoing trade talks between the superpowers.
The Chain Reaction
While the S&P technology index fell by 1.40 percent, the Philadelphia semiconductor index dropped by 2.09 percent. These sudden effects took place when Nvidia’s estimated revenue was cut by half a billion dollars for its fourth quarter. The chipmaker plunged by 13.82 percent because of decreasing demand for its gaming chips, as well as lower sales returns in China.
Caterpillar is the biggest heavy equipment manufacturer in the world. Unfortunately, its shares fell by 9.13 percent which was its worst blow yet following the company’s failure to meet Wall Street’s estimated quarterly profit in 2011. Dow Jones dropped by almost a third in stocks, while the S&P industrial index fell by 1.0 percent. Again, this was a result of China’s weak demand for Caterpillar’s equipment along with higher costs of manufacturing and freight fees.
Rick Meckler, a Cherry Lane Investments partner, briefly narrates about the sequence of events that led to the Wall Street crash. He said that investors were positive a week ago on their earnings that showed favorable digits. A week later, both the optimism and money have slipped away.
Since the start of the trade war between China and U.S., industrial companies were earning less for two months in a row. China’s data have suggested slower and weaker prices and factory activity as a result. Investors are hoping for a constructive agreement or settlement on trade for both and first and second largest economies in the world after their meetings on Wednesday and Thursday.
Market strategist at Informa Financial Intelligence, Ryan Nauman, shared his view on how China’s growing economic crisis is affecting companies and said, “the U.S. is also starting to realize that there is enough motivation to get a deal done.” Only time can tell when the band-aid is placed on the wounded economy.
Recent Wall Street Reports
Cumulative earnings beyond Wall Street estimates have helped S&P 500 reach nearly 12 percent from its drop last December. But expectations this year have lowered with concerns about the slowing economy. Since oil prices fell after American companies added rigs, a sign of a potential rise in crude production, the S&P energy index fell by 1.03 percent. Almost eleven major S&P sector indexes dropped.
While the S&P 500 lost 0.78 percent to 2,643.85 points, Dow Jones decreased by 0.84 percent at 24, 528.22 points. Nasdaq Composite fell by 1.11 percent to 7,085.69 points. Digital and online companies such as Amazon and Microsoft declined by almost 2 percent. Apple nearly dropped by 1 percent. The Nasdaq Biotech index felt the impact of Amgen Inc’s 3.43 percent drop after Evercore ISI downgraded its stocks. Analysis of competition for Amgen’s arthritis drug resulted in its negative rating.
While seven 52-week new highs and one new low were posted by S&P 500, 29 new highs and 29 new lows were recorded by the Nasdaq Composite. Compared with the last 20 trading days average of 7.7 billion on shares, the volume of U.S. trading was 7.3 billion shares.